If you have kids in private education, what is your school planning to do re VAT?

[Ladychaise]

I have two kids at a London independent school and currently just about scrape the cost of fees. Labour’s intention to add 20percent on the fees would make it impossible to keep them there, if all that cost goes to us - it is a worrying time.

The school’s bursar is being lovely but it’s very much a ‘let’s cross that bridge when we come to it’ take on it! I get that we don’t know for certain if Labour will get in or how fast they will implement this - but surely schools should be planning for this and working out how much of the VAT, if any, will be ‘covered’ by the school?

Aware there is a lot of uncertainty but does anyone else’s school have a plan in place? Thanks so much

It is unknown that's why the numbers are shaky.

It doesn't sound as though you are closely familiar with the number of SEN pupils in independent schools. It's a major motivator for people choosing independent and the numbers are large (see ISC census). That includes EHCP provision, but beyond that several tens of thousands with less severe SEN or who have been unable to get an EHCP despite severe SEN. In some LAs it's not a case of "getting an EHCP is difficult" it's that the process takes years.

Beyond SEN you have all manner of other challenges (anxiety, bereavement, victims of bullying) where families have been let down by the state system. These are children who particularly benefit from the independent experience, and society particularly benefits from them having it. Again these are major motivators for choosing independent school in the first place.

But the bigger picture is this: voters have been sold two falsehoods (1) there are tax breaks benefitting "the rich" (2) this will, with certainty, raise so much money and transform state schools. Both propositions are coming under more scrutiny thanks to various research published this year and to the Education Not Taxation campaign.

"Do you want to end tax breaks on the rich?" Becomes "do you want to harm children and potentially force some into already over-crowded schools, for a sum of money that at best won't make much difference and at worst could lose the country lots of money?"

https://www.theguardian.com/commentisfree/article/2024/may/20/vat-private-schools-labour-low-income-kids-tax-bursaries

It’s interesting that even The Guardian are pointing out the problems with the proposed policy.

Yep exactly.
The same issues have now been picked up by The I, Guardian, Times and Telegraph.

I really hope that the Labour Party start to listen and scrap
this ridiculous idea. We can live in hope that they’ll see sense at some point and not plough ahead regardless, solely in pursuit of a few extra votes from people who probably don’t fully understand the implications.

It's interesting that the Guardian article says:

While Labour’s current policy gets low marks, VAT on private schools is not a bad idea – it is an incomplete one. Education outcomes would be definitively more positive if private schools were given the simple choice between imposing VAT and offering low-income students full bursaries equal to 20% of revenues.

The point is that instead of a blanket policy that most people (except Labour) now accept is seriously flawed, there should be a discussion to look at different options. The fact that The I, Guardian Times and Telegraph are now openly criticising the policy is telling. The more people (journalists etc) start digging, the more it will become apparent that the policy won't work.
Hopefully Labpyr will also wake up to this prior to wasting millions in taxpayer money in court!

Basically the author is asking for a returned to Direct Grants and Assisted Places, both schemes having been abolished by Labour (in 1976 and 1997 respectively), but now paid for by people who already pay twice (or more) for education rather than by the government.

I'm all for the scheme but the government should pay.

For most schools, the economic effect of the author's plan is exactly the same as imposing VAT. So it throws up all the same issues that the author rightly cites in the opening paragraphs: demand for independent school still won't "defy economics", fewer parents will opt-in, more pressure on catchment areas and harm to the broader economy.

The point is that it is critical of the policy as it stands, and points out the flaws in the thinking behind it.

“taxing private schools is not like taxing private tennis clubs. With schooling, every domestic child who opts out of the private system to avoid about £3,000 of VAT will then need about £8,000 in taxpayer money annually to fund their state education. The potential result? A substantial threat to the Treasury’s ability to fund improved state education outcomes.”

Many schools already offer around 20% of pupils some kind of bursary (ours does). Admittedly those bursaries are not all at 100%, but taking that route rather than a flat 20% VAT would have less of a financial impact on many schools.

For most schools, the economic effect of the author's plan is exactly the same as imposing VAT.

Well, yes, That is exactly what he is saying. Let schools either charge the VAT or provide bursaries to lower income families.

The average over the country is currently between 20-25% in means tested bursaries anyway

The Guardian author's suggestion is full bursaries for lower income families, because (a) they're the ones that will be squeezed out or (b) they're the ones that could never afford private schooling in the first place.

Many of those 20-25% DC are on full bursaries anyway. This is something completely normal at all private schools

It’s not the same though, because most private schools already offer bursaries. It’s not unusual to have almost 10% of total fee income being spent on bursaries. At our school, the average bursary is far in excess of a 50% fee reduction.

For most schools, the economic effect of the author's plan is exactly the same as imposing VAT

The figures might be the same, but the incremental economic effect is not the same because most schools already spend a decent amount on bursaries. They might not have to spend much more to reach the 20% figure.

I was quoting MrChips For most schools, the economic effect of the author's plan is exactly the same as imposing VAT, so that's a question for him then?

I’m all for the Guardian’s solution. Having benefited myself from being an Assisted Place girl, I know from personal experience how access to a private education (which your family couldn’t otherwise have afforded) can increase opportunities and outcomes. Scrapping APs in 97 was an awful move, made on the same ideological basis as the current VAT plans.

Paying towards (although not in full) my school fees meant that my education cost the government less than it would have done had I remained in the state sector. Economically, getting rid of APs didn’t save money.

The problem with Labour’s plans on private education once again is that they are focussed on taking away opportunities on the basis that if everyone can’t have it no one should. Far better would be creating opportunities for those from lower socio-economic backgrounds to access a the quality of education and opportunity available at private schools- ie focussing on social mobility.

Interestingly, the 2023 ISC report says that there are 40,000 pupils on means tested bursaries, with a further 2000 on means tested scholarships, out of a total of 555,000 ISC school pupils. Around half of those on the bursaries get up to 50% of fees covered, its 75% on means tested scholarships.

Edit: I'm aware that the ISC doesn't cover all independent schools.

...so it does nothing to prevent the significant economic harms he identifies in his opening paragraphs.

And, since wealthier schools with large endowments already do well at bursaries, it's yet another way to make independent school more financially exclusive. VAT-free education if you go to Eton, because the endowment "does" your bursary obligation. VAT-charged if you're at a marginal school in Staffordshire with no wealth.

Don't wish to derail the thread, but have any of your schools said they will help parents for whom this policy means they'd have to pull their kids out?

I have a friend with a son at Eton and they've told parents they won't be adding any extra VAT to fees because of their endowment.

Most London indies seem to be saying that they 'hope' not to add the full 20 percent - but even an increase of 12/15 percent onto fees that have already increased massively in recent years means there are quite a lot of families that would be priced out entirely, particularly for those with 2plus kids. Shouldn't the schools be working hard to support existing pupils as much as they are worrying about future bursaries?

Same here! They sent a questionnaire out a while ago. I think it’s going to put a lot of schools away from the big cities under tbh

I like the Guardian’s solution. Schools already offer some bursaries so this wouldn’t mean a 20% fee increase (likely nearer 10%), and this would have an immediate impact - increasing opportunities for bright children to benefit from a brilliant education. At the same time this would not have such a sizeable impact on the private sector or risk a new burden on the state sector.

But this is dog whistle politics from Labour and I am not sure that they are looking for a pragmatic and common sense solution.

The ISC data shows that 8% of its pupils are on means tested bursaries or scholarships, with the majority of those receiving up to 50% of fees. You're right that it's nowhere near close to Eton, for example, which has 260 pupils out of 1300 pupils on bursaries, with 100 of those on full fee remission. Maybe Eton offers full bursaries to pupils who truly are from deprived socioeconomic backgrounds?

But I was responding to a PP's claim that the average over the country is currently between 20-25% in means tested bursaries.

Ours have said they will offset VAT as much as possible, which is likely to look like a 12% increase. Without a big endowment, I don’t know what schools can do other than reduce total costs (eliminate bursaries, reduce amenities or offerings within the school). It is tricky in that if they go too far in cutting costs they might hang on to a few economically marginal families at the expense of other families that would be displeased by an erosion in school quality and would move to other private schools in the area.

will be interesting to see if they offer targeted help, though that has the potential to create a great deal of resentment amongst families that feel quite stretched but don’t meet whatever criteria for help.

https://www.isc.co.uk/schools/sub-pages/school-fee-assistance-scholarships-and-bursaries/

This ISC link shows that a third are on reduced fees. Admittedly some will be on scholarships rather than bursaries, but some families can only afford a place with the help of a scholarship. It would be difficult to implement a policy such as that suggested by the article linked above, as there is often overlap between scholarships and bursaries.